USD/JPY Fundamental Daily Forecast – Underpinned by Risk Appetite as Focus Shifts to US Payrolls Data

The Dollar/Yen is inching lower on Thursday despite another surge in demand for risky assets. Earlier in the session, the Forex pair touched its highest level since January 22. Global equity markets continued to surge on Thursday after China moved to halve tariffs on some U.S. goods as investors bet that the global economy would avoid long-term damage from the coronavirus.

At 10:37 GMT, the USD/JPY is trading 109.803, down 0.032 or -0.03%.

The early weakness suggests that traders feel this week’s rally was a little too much, too fast, and are pulling their bids in the hopes of a pullback into more favorable price levels. Stopping just short of the recent top at 110.290 suggests investors are still expressing some concerns about the economic impact of the coronavirus on China’s economy, but not so much on the global economy.

Global Stock Markets Jump

Stocks in Asia jumped on Thursday as investors reacted to positive development on the U.S.-China trade front. Beijing said Thursday it would halve tariffs on hundreds of U.S. imports from 1:01 p.m. on February 14, according to a statement on the Ministry of Finance’s website.

The statement said the move was made in order to “advance the healthy and stable development of China-U.S. trade.

European markets opened higher on Thursday as earnings dominate investor focus and fears over the coronavirus outbreak start to fade.

Wall Street looks for a fourth straight day of gains after the Dow surged 480 points on Wednesday and the S&P 500 closed at another record high, erasing losses from the sharp sell-off on the initial coronavirus scare.

Daily Forecast

The USD/JPY will continue to be influenced by risk appetite and U.S. Treasury yields. After China’s move to lower tariffs drove up demand for risk, the focus will shift to U.S. economic data on Thursday.

On tap early at 12:30 GMT will be the Challenger Job Cuts report.

Preliminary Nonfarm Productivity, Preliminary Unit Labor Costs and Weekly Unemployment Claims follow at 13:30 GMT.

If the USD/JPY continues to drift the rest of the session despite rising demand for risk then blame it on position-squaring ahead of Friday’s U.S. Non-Farm Payrolls Report.